third-quarter company profits rise 3.9%

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    Australian Third-Quarter Company Profits Rise 3.9%
    Dec. 5 (Bloomberg) --

    Australian company profits rose more than expected for a second straight quarter in the three months ended Sept. 30 as surging Chinese demand for raw materials spurred earnings for miners.

    Gross operating profits gained 3.9 percent from the second quarter, when they increased a revised 11.6 percent, the Australian Bureau of Statistics said in Sydney today. The median forecast in a Bloomberg News survey of 15 economists was for a 3 percent gain.

    Increased earnings have fueled returns for equity investors, with Australia's benchmark S&P/ASX 200 Index gaining about 14 percent this year. The index reached an intraday record on Nov. 22. Rising income at exporters including Santos Ltd., BHP Billiton and Rio Tinto Group is tempering slowing consumer spending and home building in Australia's economy.

    ``Profits are booming and that is being reflected in the stock market in the past year,'' Stephen Koukoulas, chief Asia-Pacific strategist at TD Securities Ltd., said in Sydney. ``The central bank will be looking at these numbers and thinking the economy is doing okay.''

    The report also showed inventories held by businesses rose 0.3 percent in the third quarter. Economists had forecast a 0.8 percent increase.

    Australia's currency and bonds were little changed after the report. The local dollar bought 74.70 U.S. cents at 11:50 a.m. from 74.66 cents immediately before the reports. The yield on Australia's 6.25 percent government bond maturing April 2015 rose 1 basis point to 5.40 percent. A basis point is 0.01 percentage point.

    Economic Growth

    Reserve Bank of Australia Governor Ian Macfarlane has said he expects a pickup in exports and business investment to underpin growth in the A$800 billion economy as consumer demand cools.

    Australia's economy, the fifth-largest in the Asia-Pacific region, probably grew 0.5 percent in the third quarter as consumer spending slowed and home building dropped. The economy expanded 1.3 percent in the second quarter. The third-quarter growth report will be released on Dec. 7.

    From a year earlier, business inventories rose 2.9 percent and profits jumped 14.8 percent.

    Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign exchange gains or losses.

    Commodity producers haven't released their profit reports for the three months ended Sept. 30. Their production and sales reports have signaled rising earnings in the quarter.

    Soaring Sales

    Rio Tinto Group, the world's third-largest mining company, said third-quarter production of iron ore rose 18 percent as it expanded mine capacity for the steelmaking raw material to meet demand, led by China.

    Commodity prices and profits of mining companies such as BHP Billiton and Rio have surged to records because of demand for raw materials in China, the world's fastest-growing major economy.

    Rio, the country's biggest supplier of iron ore, said it will spend $1.35 billion to expand a mine and port in Western Australia to meet ``strong'' demand.

    Santos, Australia's third-biggest oil and gas producer, said third-quarter sales surged 82 percent after prices rose and new projects boosted production. Sales climbed to A$764.5 million ($571 million) in the three months ended Sept. 30 from A$420.3 million a year earlier, the Adelaide-based company said in October.

    Woodside Petroleum Ltd., Australia's second-largest oil and gas company, said third-quarter sales jumped 24 percent after oil prices and production increased. Sales rose to A$741.2 million in the three months ended Sept. 30.

    Chief Executive Don Voelte is plowing back profit from record oil prices into almost A$10 billion of projects with the aim of almost doubling Woodside's production in about four years.

    BHP Billiton, the world's biggest mining company, said quarterly iron ore production rose 5 percent after it expanded mines and transport facilities in Western Australia. Nickel and copper production surged to records in the three months ended Sept. 30.

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